Time To Worry? Analysts Are Downgrading Their HSS Engineers Berhad (KLSE:HSSEB) Outlook

The analysts covering HSS Engineers Berhad (KLSE:HSSEB) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business. The stock price has risen 4.4% to RM1.18 over the past week. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

After the downgrade, the twin analysts covering HSS Engineers Berhad are now predicting revenues of RM236m in 2024. If met, this would reflect a huge 28% improvement in sales compared to the last 12 months. Per-share earnings are expected to jump 40% to RM0.05. Prior to this update, the analysts had been forecasting revenues of RM278m and earnings per share (EPS) of RM0.059 in 2024. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a considerable drop in earnings per share numbers as well.

Check out our latest analysis for HSS Engineers Berhad

Analysts made no major changes to their price target of RM1.54, suggesting the downgrades are not expected to have a long-term impact on HSS Engineers Berhad's valuation.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's clear from the latest estimates that HSS Engineers Berhad's rate of growth is expected to accelerate meaningfully, with the forecast 28% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 4.6% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 13% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that HSS Engineers Berhad is expected to grow much faster than its industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for HSS Engineers Berhad. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on HSS Engineers Berhad after the downgrade.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At least one analyst has provided forecasts out to 2026, which can be seen for free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks with high insider ownership.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.